If the U.S. economy falls over the “fiscal cliff,” it would have an immediate and severe impact on U.S. business travel, according to new research from the Global Business Travel Association Foundation (GBTA). The new report analyzes the business travel impact of expiring tax cuts and automatic spending reductions – commonly referred to as the “fiscal cliff” – as well as the longer-term ramifications of leaving current levels of deficit spending unaddressed. 

The report models the potential business travel impact of two scenarios – one in which the fiscal cliff takes effect, and one where no changes are made to current tax and spending provisions. 

Fiscal Cliff Scenario: If the fiscal cliff occurs, the U.S. economy would enter a recession. This would lead to a total loss of $20 billion in spending on U.S. business travel over the next nine quarters – a 2.5% decline – and a reduction of 32 million business trips. 

However, the elimination of tax cuts and reductions in federal spending would lead to reduced deficits and lower interest rates over the long run, resulting in business travel spending and an overall economy that grows more quickly after absorbing the shock of the fiscal cliff. 

No Fiscal Restraint Scenario: If all provisions of the fiscal cliff are eliminated or delayed indefinitely, business travel would experience more robust trip volume and spending as a result of stimulus from lower tax rates and continued government spending. In the near term, this scenario would lead to a cumulative loss of only 300,000 business trips and a gain of $5.5 billion in total business travel spending over the next nine quarters. 

However, by 2014, much of the spending growth would be attributed to higher inflation. Larger budget deficits and growing debt will begin to take a toll, and business travel spending growth would continue to slow beyond the forecast horizon.  

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